Responsible for the company's external resources, the procurement function plays a key role in the management of supplier relationships. This task can represent a real competitive advantage and an effective lever for success for the company. To do this, procurement departments need to build healthy and sustainable relationships with suppliers and service providers in a spirit of mutual development.
The new reality of customer-supplier relationships
With their expertise and know-how, suppliers can be positioned at the heart of every company's value creation process. To take full advantage of this potential, the procurement function must create the right conditions by managing its relationships with them.
However, the complex and uncertain international context has changed things. From supply chain disruptions to geopolitical crises to technological disruptions, a paradigm shift is occurring in the relationship between suppliers and customers. Today, companies want to become the "favourite" customer of their suppliers. Increasing closeness, transparency and trust ensures the smooth running of the business and is even of strategic interest.
Now that power relations are over, it is all about building real partnerships with your suppliers and service providers. Exchanges are more balanced and each party assumes its responsibilities and fulfils its commitments.
From supplier to partner
Procurement departments are involved and invested in managing the relationship with suppliers based on the expected result, the possible degree of contribution to the success of their company. There are three main types of relationships:
- Purely transactional supplier relationships;
- Strategic alliances: both parties collaborate and align their processes to achieve common goals;
- Partnerships: both parties work closely together and tailor their strategies to maximise long-term results.
Further reflection brings us closer to the concept of an extended enterprise in which the relationship with suppliers and service providers are involved in the stakes of the organisation. Following this idea, the supplier ecosystem becomes a resource for the operational model of organisations, enabling them to learn and gain competitiveness in the long run.
What are the levers to improve the management of relationships with suppliers?
To take this approach further, procurement departments can draw on a number of best practices to develop key relationships with suppliers in order to create value.
Digitalise the management of supplier relationships using tools
To simplify and streamline the management of a strong supplier relationship, companies can use SRM software (Supplier Relationship Management). Such solutions provide 360° visibility and real-time monitoring of partner activities for continuous improvement. This promotes to share a healthy and stable relationship.
Manage risks and opportunities
It is important to map the risks as well as the opportunities presented by suppliers and then implement appropriate actions. The aim of this approach is to involve them in a better continuous improvement plan, as part of a win-win strategy.
Proper framing of the contract
It is in a company's interest to enter into contracts with suppliers from whom it makes repeat purchases. In such cases, it is essential to draw up a balanced contract, containing as many details as possible on the terms of payment as well as the conditions of collaboration, delivery, evaluation, termination, etc. The aim is to avoid any potential disputes or confusion.
Support CSR commitments
To contribute to their CSR (Corporate Social Responsibility) strategy, organisations can also implement a sustainable procurement policy in association with their suppliers. This approach represents a development opportunity for the entire ecosystem, with everyone becoming an agent of change.
Optimise costs
Companies can also work hand in hand with their suppliers to optimise their procurement management processes and operations. Whatever the lever used (dematerialising transactions, improving quality, rationalising the supplier portfolio, etc.), it is a project that enables both partners to derive joint benefits through a reduction in costs and a gain in performance.
Reduce payment terms
If suppliers are expected to maintain and respect their contractual commitments, companies must be irreproachable when it comes to the payment of invoices and try to avoid delays as much as possible, or face late fees. In the event of late payments, it is essential to communicate and be transparent with partners. Reliability and transparency when it comes to meeting payment deadlines promote a climate of trust.
Adopt new approaches
Procurement departments can also rethink the way they collaborate and communicate to accommodate certain types of stakeholders who are looking to establish a different kind of relationship. These may be start-ups, associations, or social integration organisations, for example. New approaches (open innovation, co-construction, eco product design, etc.) as well as development levers (planning, long-term commitment, etc.) are possible to increasingly understand and attract these stakeholders.
Ultimately, relationships with suppliers are an integral part of the company's intangible assets. They should therefore be protected and developed in line with the company's strategy. In this context, the procurement function plays a global and unifying role when it comes to addressing the strategic issues of attractiveness and loyalty involved.
[1] McKinsey & Company, Buying into a more sustainable value chain, 2021
